Debt Reduction

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You didn’t mean for it to happen and, even though you were diligent and as frugal as can be, now it’s time to start worrying about your credit card debt reduction. Well, don’t feel bad. You’re not alone. Unfortunately, the credit card companies themselves have a lot to do with the problem but that’s neither here nor there. It doesn’t matter to you whose fault it is, you just want to find a way out of the mess.

It’s happening to more and more people every day – escalating credit card debt. Debt so large that it seems impossible that it will ever be paid off. And if all you’re making is the minimum payment every month, it may very well never be paid off. But we’ll get to that. Let’s look at 6 tips to help you with credit card debt reduction.

Stop using them – This seems like a no-brainer but you’d be surprised how many people won’t even consider cutting up those cards. If you keep using them you’re just going to keep adding to your debt. And obviously, you already have enough of that or you wouldn’t be worried about credit card debt reduction.

Stop making the minimum payment – Yes, you still have to make a payment every month. But you need to pay more than the minimum. Consider this scenario – If you owe $1000 on your credit card and you make only the minimum monthly payment every month it will take you approximately 20 years to pay it off. And at the end of that time you will have paid out more than $3000. That’s 3 times the money you actually borrowed!

Ask for a lower interest rate – Look at the interest rate on all your cards and on credit card offers you see. Then call your provider and ask them to lower your interest rate to meet their competition. Credit card companies have specials all the time and they’ll probably lower your rate for at least 6 months. If not, threaten to transfer your balance and they’ll have a sudden change of heart. According to the video below, it’s fairly easy to negotiate with your credit card company:

Look for a better deal – Look for credit card offers that have a special rate if you sign up. Somebody is always offering 0% interest for the first 6 months if you’ll transfer the balance off of an existing card. Instead of paying $30 a month and having at least $15 of it go toward interest, you’ll be able to reduce your debt a lot faster when that whole $30 is going on the principal. Remember, though, it won’t do your credit card debt reduction plan much good if you start racking up a balance on that card again.

Know your terms – If you have more than one card they probably each have a different set of payment terms. Know what they are for each card so you can avoid paying late fees and other penalties. For example, some cards penalize you for going over your credit limit, some charge you additional fees for cash withdrawals. You payment may be due on the 15th for one card and on the 16th for the other. But if they both arrive on the 15th you’re going to incur a late fee from at least one. And be careful of annual fees. If your provider charges and annual fee, call them and ask them to waive it. If they won’t – transfer your balance elsewhere.

Pay off the highest interest rate first – Take a look at all of your cards to determine which one you’re paying the most interest to each month and pay that one off first. Make the minimum payment on all your other cards and put as much money as possible toward that higher debt. You’ll reduce your debt much faster because you’ll be eliminating all of that interest. After you have the first card paid off then go to the next highest and knock it off the same way. Once you eliminate that first card you’ll be even more motivated to stick with your credit card debt reduction plan.

It’s an unfortunate fact that the credit card companies have their customers over a barrel. And every time Congress steps in to protect the consumer, those nasty credit card creeps just find another loophole in the system. No matter how you look at it it will never be beneficial for you to use a credit card and carry a balance. The lender always wins in the end. The best thing you can do is bit the bullet and start your credit card debt reduction plan today. Eliminate the debt as quickly as possible and cut up the cards.